BRAMPTON AND TORONTO, ON, July 15, 2013 /CNW/ - Loblaw Companies Limited
(TSX: L) and Shoppers Drug Mart Corporation (TSX: SC) today announced a
definitive agreement under which Loblaw will acquire all of the
outstanding Shoppers Drug Mart common shares for $33.18 in cash plus
0.5965 Loblaw common shares per each Shoppers Drug Mart common share,
on a fully pro rated basis. Using the Loblaw closing common share price
on July 12, 2013, this amounts to $61.54 per Shoppers Drug Mart common
share. This price represents a 29.4% premium to the 20-day VWAP of
Shoppers Drug Mart common shares as of July 12, 2013.

This strategic union will enhance the companies' competitive positioning
in an evolving retail landscape, creating new growth opportunities for
shareholders, more and better choices for customers, and greater
convenience through Shoppers Drug Mart's footprint in the important and
growing small-urban store sector.

Creating Compelling New Blueprint for Serving Canadian Customers

"This transformational partnership changes the retail landscape in
Canada. With scale and capability, we will be able to accelerate our
momentum and strengthen our position in the increasingly competitive
marketplace," said Galen G. Weston, Executive Chairman of Loblaw.
"This combination creates a compelling new blueprint for the future,
positioning us to capitalize on important trends in society, from the
emphasis on health, wellness and nutrition, to the imperatives of value
and convenience."

"Our customer proposition is at the heart of this combination," said
Vicente Trius, President of Loblaw. "Together, we will be able to
significantly enhance the customer experience by offering even greater
assortments, service, value and convenience while preserving the unique
shopping experiences that make both companies leaders in their
respective segments. We are extremely happy to welcome Shoppers Drug
Mart and its talented people, including their entrepreneurial and
trusted Associate-owners, who are well-known for their patient care and
friendly customer service. We intend to preserve the great strengths
of what the company has built by keeping Shoppers Drug Mart as a
separate division of Loblaw, with its own dedicated management team led
by Domenic Pilla.

"This acquisition also will allow us to accelerate our success in
driving growth and profitability at Loblaw organically. Our customer
proposition continues to deliver results, and I am enthusiastic about
the prospect of value creation opportunities on multiple fronts," Mr.
Trius concluded.

Domenic Pilla, President and Chief Executive Officer of Shoppers Drug
Mart, said: "We are delighted to partner with Loblaw to leverage our
combined strengths. For our shareholders, this transaction provides
significant and immediate value, as well as the ability to benefit from
future upside by virtue of their continued ownership of shares in the
combined company. For our Associate-owners and employees, who are a
valued part of the equation, it provides the opportunity to pursue
rewarding careers as we grow together. And for our customers, it
provides more locations with an enhanced mix of products and offerings
that contribute to the good health of Canadians."

Financial Highlights

On a pro forma basis, the combined company generated in excess of $42
billion in revenue, $3 billion in EBITDA*, and $1 billion in free cash
flow* in 2012. The transaction is expected to lead to double-digit
accretion, adjusted for intangible amortization, in Loblaw earnings per
share in the first year.

The combination is expected to yield annual cost synergies of $300
million by year three, phased in evenly over the first three years
following closing. These synergies are not dependent on any store
closings.

The total consideration will consist of approximately 53.9% cash and
46.1% Loblaw common shares. Shoppers Drug Mart shareholders will have
the ability to choose whether to receive $61.54 in cash or 1.29417
Loblaw common shares plus $0.01 cash for each Shoppers Drug Mart share
held, subject to pro ration. The maximum amount of cash to be paid by
Loblaw will be approximately $6.7 billion and the maximum number of
Loblaw common shares to be issued will be approximately 119.9 million,
based on the fully diluted number of Shoppers Drug Mart shares
outstanding.

Shoppers Drug Mart shareholders, who will own approximately 29% of the
combined company, stand to benefit from substantial upside over the
long-term, driven by the combined company's strategic position and
achievement of full run-rate synergies.

Loblaw has structured the financing with the intent of maintaining its
current BBB-mid credit rating. Loblaw will finance the cash element of
the transaction with available cash resources and committed bank
facilities fully underwritten by Merrill Lynch, Pierce, Fenner & Smith
Inc., Bank of America, N.A., Canada Branch and Bank of America, N.A.
These committed facilities consist of a $3.5 billion term loan and a
$1.6 billion bridge loan that Loblaw plans to replace primarily through
issuance of unsecured notes. The combined company's significant cash
flow will allow for rapid debt repayment and will ensure that Loblaw
will have ample liquidity and maximum flexibility to support ongoing
growth prospects, acquisitions and investments.

George Weston Limited, Loblaw's controlling shareholder, has entered
into a voting agreement in support of the transaction. To finance a
portion of the cash consideration, Weston has agreed to subscribe for
$500 million of additional Loblaw common shares at a price of $47.55
per share, Loblaw's closing share price on July 12, 2013. After giving
effect to this investment, Weston's voting ownership will be
approximately 46% of Loblaw's common shares upon completion of the
transaction.

Approvals and Closing Conditions

The transaction will be carried out by way of a court-approved plan of
arrangement and will require the approval of at least 66 2/3% of the
votes cast by the shareholders of Shoppers Drug Mart at a special
meeting expected to take place in September 2013. Under applicable TSX
rules, the transaction also requires the approval of Loblaw
shareholders by majority vote, as the number of Loblaw common shares to
be issued in the transaction exceeds 25% of the total number of
outstanding Loblaw common shares. As Weston holds approximately 63% of
Loblaw's common shares, Loblaw expects that the TSX will accept
Weston's agreement to support the transaction as evidence of
shareholder approval and not require Loblaw to hold a shareholder
meeting. In addition to shareholder and court approvals, the
transaction is subject to compliance with the Competition Act and
certain other closing conditions customary in transactions of this
nature. Loblaw and Shoppers Drug Mart anticipate that the transaction
will be completed within six to seven months.

Further information regarding the transaction will be included in the
management proxy circular expected to be mailed to Shoppers Drug Mart
shareholders in August. Copies of the arrangement agreement and
management proxy circular will be available on SEDAR at www.sedar.com. The transaction will provide a capital gains tax-deferred roll-over
option for taxable Canadian holders of Shoppers Drug Mart shares who
elect to receive Loblaw shares. The arrangement agreement provides that
Shoppers Drug Mart is subject to non-solicitation provisions and
provides that the Board of Directors of Shoppers Drug Mart may, under
certain circumstances, terminate the agreement in favour of an
unsolicited superior proposal, subject to payment of a termination fee
of $300 million to Loblaw and subject to a right of Loblaw to match the
superior proposal in question.

Both companies' boards of directors have unanimously determined that the
proposed combination is in the best interest of their respective
companies. BofA Merrill Lynch is acting as financial advisor to Loblaw
for purposes of this transaction and delivered an opinion to Loblaw's
Board of Directors as to the fairness, from a financial point of view,
of the consideration to be paid by Loblaw in the transaction. RBC
Capital Markets is acting as financial advisor to Shoppers Drug Mart
and has provided an opinion to the board of directors of Shoppers Drug
Mart that the consideration under the transaction is fair, from a
financial point of view, to Shoppers Drug Mart shareholders. Loblaw
retained Torys LLP as its legal counsel and Borden Ladner Gervais LLP
in connection with competition matters. Osler, Hoskin & Harcourt LLP is
acting as legal counsel to Shoppers Drug Mart.

Conference Call Information
Loblaw and Shoppers Drug Mart will host a conference call and webcast
accompanied by slides on July 15, 2013 at 8:00 a.m. ET.

About Loblaw Companies Limited
Loblaw Companies Limited, a subsidiary of George Weston Limited, is
Canada's largest food retailer and a leading provider of drugstore,
general merchandise and financial products and services. Loblaw is one
of the largest private sector employers in Canada. With more than 1,000
corporate and franchised stores from coast to coast, Loblaw and its
franchisees employ approximately 134,000 full-time and part-time
employees. Through its portfolio of store formats, Loblaw is committed
to providing Canadians with a wide, growing and successful range of
products and services to meet the everyday household demands of
Canadian consumers. Loblaw is known for the quality, innovation and
value of its food offering. It offers Canada's strongest control
(private) label program, including the unique President's Choice®, no
name® and Joe Fresh® brands. In addition, the Company makes available
to consumers President's Choice® financial services and offers the PC®
points and PC Plus™ loyalty program. For more information, visit
Loblaw's website at www.loblaw.ca and Loblaw's issuer profile at www.sedar.com.

About Shoppers Drug Mart Corporation
Shoppers Drug Mart Corporation is one of the most recognized and trusted
names in Canadian retailing. The Company is the licensor of
full-service retail drug stores operating under the name Shoppers Drug
Mart (Pharmaprix in Québec). With 1,242 Shoppers Drug Mart and
Pharmaprix stores operating in prime locations in each province and two
territories, the Company is one of the most convenient retailers in
Canada. The Company also licenses or owns 57 medical clinic pharmacies
operating under the name Shoppers Simply Pharmacy (Pharmaprix
Simplement Santé in Québec) and six luxury beauty destinations
operating as Murale. As well, the Company owns and operates 62
Shoppers Home Health Care stores, making it the largest Canadian
retailer of home health care products and services. In addition to its
retail store network, the Company owns Shoppers Drug Mart Specialty
Health Network Inc., a provider of specialty drug distribution,
pharmacy and comprehensive patient support services; and MediSystem
Technologies Inc., a provider of pharmaceutical products and services
to long-term care facilities.

Forward-Looking StatementsThis News Release for Loblaw Companies Limited ("Loblaw') and Shoppers
Drug Mart Corporation ("Shoppers Drug Mart ") contains forward-looking
statements about the proposed acquisition by Loblaw of all of the
outstanding common shares of Shoppers Drug Mart . Forward-looking
statements are typically identified by words such as "expect",
"anticipate", "believe", "foresee", "could", "estimate", "goal",
"intend", "plan", "seek", "strive", "will", "may" and "should" and
similar expressions. Forward-looking statements reflect current
estimates, beliefs and assumptions, which are based on Loblaw's and
Shoppers Drug Mart 's perception of historical trends, current
conditions and expected future developments, as well as other factors
management believes are appropriate in the circumstances. Loblaw's and
Shoppers Drug Mart's estimates, beliefs and assumptions are inherently
subject to significant business, economic, competitive and other
uncertainties and contingencies regarding future events and as such,
are subject to change. Loblaw and Shoppers Drug Mart can give no
assurance that such estimates, beliefs and assumptions will prove to be
correct.

This News Release contains forward-looking statements concerning: the
combined company's financial position, cash flow and growth prospects;
certain strategic benefits, and operational, competitive and cost
synergies; management of the combined company; the timing of the
Shoppers Drug Mart's shareholders meeting and publication of related
shareholder materials; the expected completion date of the proposed
transaction; the anticipated tax treatment of the proposed combination
for Shoppers Drug Mart shareholders; and Loblaw's and Shoppers Drug
Mart's anticipated future results. The pro forma information set forth
in this News Release should not be considered to be what the actual
financial position or other results of operations would have
necessarily been had Loblaw and Shoppers Drug Mart operated as a single
combined company as, at, or for the periods stated.

Numerous risks and uncertainties could cause the combined company's
actual results to differ materially from the estimates, beliefs and
assumptions expressed or implied in the forward-looking statements,
including, but not limited to: failure to realize anticipated results,
including revenue growth, anticipated cost savings or operating
efficiencies from the combined company's major initiatives, including
those from restructuring; failure to realize benefits from investments
in the combined company's IT systems, including the combined company's
IT systems implementation, or unanticipated results from these
initiatives; the inability of the combined company's IT infrastructure
to support the requirements of the combined company's business;
heightened competition, whether from current competitors or new
entrants to the marketplace, changes in economic conditions including
the rate of inflation or deflation, changes in interest and currency
exchange rates and derivative and commodity prices; public health
events including those related to food safety; failure to achieve
desired results in labour negotiations, including the terms of future
collective bargaining agreements, which could lead to work stoppages;
failure to attract and retain key employees and pharmacists or
effectively manage succession planning; risks associated with the
performance of the combined company's associate-owned or franchised
store network; the inability of the combined company to manage
inventory to minimize the impact of obsolete or excess inventory and to
control shrink; the impact of potential environmental liabilities;
failure to respond to changes in consumer tastes and buying patterns;
reliance on the performance and retention of third-party service
providers including those associated with the combined company's supply
chain and apparel business; supply and quality control issues with
vendors; other disruptions to the combined company's distribution
operations or supply chain; damage to the reputation of brands promoted
by the combined company, or to the reputation of any supplier or
manufacturer of these brands; product quality and product safety risks
which could expose the combined company to product liability claims and
negative publicity; new, or changes to current, federal and provincial
laws, rules and regulations, including pharmacy reimbursement programs,
prescription drug pricing and the availability of manufacturer
allowances, or changes to such laws and regulations that increase
compliance costs; the risk that the combined company will be unable to
implement successful strategies to manage the impact of the drug system
reform initiates implemented or proposed in most provincial
jurisdictions; risks associated with alternative arrangements for
sourcing generic drug products, including intellectual property and
product liability risks; changes in the combined company's income,
commodity, other tax and regulatory liabilities including changes in
tax laws, regulations or future assessments; new, or changes to
existing, accounting pronouncements; any requirement of the combined
company to make contributions to its registered funded defined benefit
pension plans, post-employment benefits plan or the multi-employer
pension plans in which it participates in excess of those currently
contemplated; the risk that the combined company would experience a
financial loss if its counterparties fail to meet their obligations in
accordance with the terms and conditions of their contracts with the
combined company; the inability of the combined company to collect on
its credit card receivables; failure of the combined company to lease
or obtain suitable store locations on economically favourable terms;
the effect of seasonality fluctuations; the risk of violations of law,
breaches of the combined company's policies or unethical behavior;
property and casualty risks; injuries at the workplace or health
issues; the risk of material adverse effects arising as a result of
litigation; and events or series of events may cause business
interruptions.

Readers are cautioned that the foregoing list of factors is not
exhaustive. Other risks and uncertainties not presently known to Loblaw
and Shoppers Drug Mart or that Loblaw and Shoppers Drug Mart presently
believe are not material could also cause actual results or events to
differ materially from those expressed in its forward-looking
statements. Additional information on these and other factors that
could affect the operations or financial results of Loblaw, Shoppers
Drug Mart or the combined company are included in reports filed by
Loblaw and Shoppers Drug Mart with applicable securities regulatory
authorities and may be accessed through the SEDAR website (www.sedar.com).

There can be no assurance that the proposed combination will occur or
that the anticipated strategic benefits and operational, competitive
and cost synergies will be realized. The proposed combination is
subject to various regulatory approvals, including approvals under the
Competition Act and by the TSX, and the fulfillment of certain
conditions, and there can be no assurance that any such approvals will
be obtained and/or any such conditions will be met. The proposed
combination could be modified, restructured or terminated.

Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect Loblaw's and Shoppers Drug
Mart's expectations only as of the date of this News Release. Loblaw
and Shoppers Drug Mart disclaim any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.

*This News Release uses the following non-GAAP measures: EBITDA and
free cash flow. Loblaw and Shoppers Drug Mart believe these non-GAAP
financial measures provide useful information to both management and
investors in measuring financial performance. These measurers do not
have a standard meaning prescribed by GAAP and therefore they may not
be comparable to similarly titled measurers presented by other publicly
traded companies, and should not be construed as an alternative to
other financial measures determined in accordance with GAAP.